The primary purpose of the mean absolute deviation (MAD) in forecasting is to

61) The primary purpose of the mean absolute deviation (MAD) in forecasting is to

A) estimate the trend line

B) eliminate forecast errors

C) measure forecast accuracy

D) seasonally adjust the forecast

E) all of the above

Answer:  C

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-4

62) Given forecast errors of -1, 4, 8, and -3, what is the mean absolute deviation?

A) 2

B) 3

C) 4

D) 8

E) 16

Answer:  C

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-4

63) The last four months of sales were 8, 10, 15, and 9 units. The last four forecasts were 5, 6, 11, and 12 units. The Mean Absolute Deviation (MAD) is

A) 2

B) -10

C) 3.5

D) 9

E) 10.5

Answer:  C

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-4

64) A time series trend equation is 25.3 + 2.1 X. What is your forecast for period 7?

A) 23.2

B) 25.3

C) 27.4

D) 40.0

E) cannot be determined

Answer:  D

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-3

65) For a given product demand, the time series trend equation is 53 - 4 X. The negative sign on the slope of the equation

A) is a mathematical impossibility

B) is an indication that the forecast is biased, with forecast values lower than actual values

C) is an indication that product demand is declining

D) implies that the coefficient of determination will also be negative

E) implies that the cumulative error will be negative

Answer:  C

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

66) Yamaha manufactures which set of products with complementary demands to address seasonal fluctuations?

A) golf clubs and skis

B) swimming suits and winter jackets

C) jet skis and snowmobiles

D) pianos and guitars

E) ice skates and water skis

Answer:  C

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-5

67) Which of the following is true regarding the two smoothing constants of the Forecast Including Trend (FIT) model?

A) One constant is positive, while the other is negative.

B) They are called MAD and cumulative error.

C) Alpha is always smaller than beta.

D) One constant smoothes the regression intercept, whereas the other smoothes the regression slope.

E) Their values are determined independently.

Answer:  E

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

68) Demand for a certain product is forecast to be 800 units per month, averaged over all 12 months of the year. The product follows a seasonal pattern, for which the January monthly index is 1.25. What is the seasonally-adjusted sales forecast for January?

Answer:  FALSE

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-5

69) A seasonal index for a monthly series is about to be calculated on the basis of three years' accumulation of data. The three previous July values were 110, 150, and 130. The average over all months is 190. The approximate seasonal index for July is

A) 0.487

B) 0.684

C) 1.462

D) 2.053

E) cannot be calculated with the information given

Answer:  B

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-5

70) A fundamental distinction between trend projection and linear regression is that

A) trend projection uses least squares while linear regression does not

B) only linear regression can have a negative slope

C) in trend projection the independent variable is time; in linear regression the independent variable need not be time, but can be any variable with explanatory power

D) linear regression tends to work better on data that lack trends

E) trend projection uses two smoothing constants, not just one

Answer:  C

Diff: 2

Topic:  Associative forecasting methods: Regression and correlation analysis

Objective:  LO4-6

71) The degree or strength of a relationship between two variables is shown by the

A) alpha

B) mean

C) mean absolute deviation

D) correlation coefficient

E) cumulative error

Answer:  D

Diff: 2

Topic:  Associative forecasting methods: Regression and correlation analysis

Objective:  LO4-6

72) If two variables were perfectly correlated, the correlation coefficient r would equal

A) 0

B) -1

C) 1

D) B or C

E) none of the above

Answer:  D

Diff: 2

Topic:  Associative forecasting methods: Regression and correlation analysis

Objective:  LO4-6

73) The last four weekly values of sales were 80, 100, 105, and 90 units. The last four forecasts were 60, 80, 95, and 75 units. These forecasts illustrate

A) qualitative methods

B) adaptive smoothing

C) slope

D) bias

E) trend projection

Answer:  D

Diff: 1

Topic:  Monitoring and controlling forecasts

Objective:  LO4-7

74) The tracking signal is the

A) standard error of the estimate

B) absolute deviation of the last periods forecast

C) mean absolute deviation (MAD)

D) ratio of cumulative error/MAD

E) mean absolute percentage error (MAPE)

Answer:  D

Diff: 2

Topic:  Monitoring and controlling forecasts

Objective:  LO4-7

75) Computer monitoring of tracking signals and self-adjustment if a signal passes a preset limit is characteristic of

A) exponential smoothing including trend

B) adaptive smoothing

C) trend projection

D) focus forecasting

E) multiple regression analysis

Answer:  B

Diff: 2

Topic:  Monitoring and controlling forecasts

Objective:  LO4-7

76) Many services maintain records of sales noting

A) the day of the week

B) unusual events

C) weather

D) holidays

E) all of the above

Answer:  E

Diff: 2

Topic:  Forecasting in the service sector

Objective:  LO4-2

77) Taco Bell's unique employee scheduling practices are partly the result of using

A) point-of-sale computers to track food sales in 15 minute intervals

B) focus forecasting

C) a six-week moving average forecasting technique

D) multiple regression

E) A and C are both correct.

Answer:  E

Diff: 2

Topic:  Forecasting in the service sector

Objective:  LO4-3

78) Long-range forecasting is generally done in planning for

A) job scheduling

B) production levels

C) cash budgeting

D) capital expenditures

E) planning purchasing

Answer:  D

Diff: 2

Topic:  Forecasting time horizons

Objective:  LO4-1

79) Short-range forecasting tends to be __________ than longer-range forecasts

A) less accurate

B) more accurate

C) about the same

D) significantly more difficult

E) significantly less difficult

Answer:  B

Diff: 2

Topic:  Forecasting time horizons

Objective:  LO4-1

80) __________ expresses the error as a percent of the actual values, undistorted by a single large value.

A) MAD

B) MSE

C) MAPE

D) FIT

E) The smoothing constant

Answer:  C

Diff: 2

Topic:  Measuring forecast error

Objective:  LO4-4